Special report: Sector outlook 2008

But to deliver these projects, governments must reform the way schemes are implemented. The region’s chronic lack of capacity means major projects are being delayed because equipment, materials and manpower cannot be obtained within the timescales fixed by clients.

Clients must be more realistic about deadlines. Simply throwing money at projects to ensure delivery meets completion dates fuels inflation by further pushing up supply costs, while forcing unrealistic project schedules risks alienating suppliers who can choose which projects to take on.

Investment in infrastructure is essential, but so is ensuring that the timescales are realistic enough to ensure contractors do not drop out before signing on the dotted line.

Muscat’s decision this week to extend the tender period on government schemes is a sensible move that should be replicated by other governments.

Moving into 2008, the demand for infrastructure and investment in projects is not slowing, but the timescale for their delivery should.

Sector outlook 2008 index: All the stories

• Business calendar:The key dates in 2008

• Energy:High oil prices make expensive projects economic while increasing production rates remains a priority

• Petrochemicals:Project activity is set to slow as feed stock allocations dry up

• Power & water:Clients are forced to reassess projects as a shortage of resources hits the sector

• Construction:Competition for labour and materials is pushing up costs and forcing some firms out of the running for projects

• Industry: Despite cost rises, major industrial projects are still being pursued by governments

• Defence: A series of major defence deals are expected in 2008

• Banking & finance: Interest rates are set to fall as the region’s central banks follow the US in making cuts

• Capital markets:Stock markets in the region continue to recover

• Transport: Gulf transport projects take a huge step forward in 2008 as new schemes go ahead

• Telecoms: Operators must look to new business models to continue growing their businesses

• Construction costs forecast: Rising labour rates are set to continue into 2008 as manpower becomes a critical issue